Reporting on one luxury car hitting the market after another and a seemingly endless race for the latest in technological breakthroughs, it seems hard to believe, but the fiercest competition in the automotive industry is emerging in the ultra-low cost segment. As markets like India and China continue to develop, their billions of citizens are moving up from bicycles and scooters to low-cost cars, and the sticker prices keep getting lower and lower.

Four years ago, India-based Tata Motors vowed to make a car which will sell for $2500. It seemed like a joke at the time, but that car is almost ready to hit the market, and the competitors are getting ready to put up a fight. With its bare-bones Logan sedan, Renault has the leg up on other automakers including Toyota, Volkswagen, Fiat, PSA and GM Daewoo, which are all preparing to get in on the low-cost market.

Carmakers are keeping costs down by developing the cars in India, and though the profit margins are dramatically lower than in premium segments, the companies are clamoring to establish their footholds in the emerging markets and hope that the volume will make it all worthwhile.

While the ultra-affordable subcompacts are being designed with developing countries in mind, automakers are surprised to find their no-frills offerings are being received well even in Europe, where customers see the savings as a worthwhile alternative to spending thousands more on higher-priced cars. Standard safety features and emissions control mean that a car that would cost $3000 in India costs $6-7000 in a Western country, but even at those prices the cheap imports undercut anything else on the market by thousands. It's being hailed as an impending revolution in the automotive industry every bit as pivotal as was the Ford Model T.

[Source: Business Week]

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